Did political constraints bind during transition?

Abstract:
Many theoretical models of transition are driven by the assumption that economic decision making is subject to political constraints. In this paper we test whether the 'winners' and 'losers' of economic reform influenced voting behaviour in the first five national elections in the Czech Republic. We propose that voters, taking stock of endowments from the planning era, could predict whether they would become winners or losers of transition. Using survey data we measure the degree to which regions were 'not afraid' or 'afraid' of economic reform in 1990. We define the former as potential 'winners' who should vote for pro-reform parties and the latter as potential 'losers' who should support left-wing parties. Using election results and economic indicators at the regional level, we demonstrate that there is persistence in support for pro-reform and communist parties which is driven by prospective voting based on initial conditions in 1990. We find that regional unemployment rates in 2002 are good predictors of voting patterns in 1990 and provide empirical evidence that political constraints bind during transition. Copyright (c) 2007 The Authors Journal compilation (c) 2007 The European Bank for Reconstruction and Development .